OWS to Buy, Forgive Distressed Consumer Debt

This is very cool: The People’s Bailout — Occupy Wall Street plans to buy distressed consumer debt for pennies on the dollar … and then forgive it.

OWS is going to start buying distressed debt (medical bills, student loans, etc.) in order to forgive it. As a test run, we spent $500, which bought $14,000 of distressed debt. We then ERASED THAT DEBT. (If you’re a debt broker, once you own someone’s debt you can do whatever you want with it — traditionally, you hound debtors to their grave trying to collect. We’re playing a different game. A MORE AWESOME GAME.)

This is a simple, powerful way to help folks in need — to free them from heavy debt loads so they can focus on being productive, happy and healthy. As you can see from our test run, the return on investment approaches 30:1. That’s a crazy bargain!

Now, after many consultations with attorneys, the IRS, and our moles in the debt-brokerage world, we are ready to take the Rolling Jubilee program LIVE and NATIONWIDE, buying debt in communities that have been struggling during the recession.

As Rafe Colburn says “Incredible example of hacking the system for positive change.”

15 Responses to OWS to Buy, Forgive Distressed Consumer Debt

That actually sounds like a really cool idea. Presumably the debt holder gets what it wants ($500) and the debtor gets what he or she wants (to not be in debt). Interesting.

My next thoughts are, however, wondering how it is that one can buy $14K in debt of $500? I don’t doubt that it happened that way, it just seems so small that one wonders how the bank would go for it. Was this debt that was worth $0 to the bank, and thus an empty exercise (meaning the bank WON’T sell debt that’s actually worth a damn for anything like that ratio)? In that sense, it’s a neat way to to peel back one layer of society’s debt (and maybe an important layer), but maybe such a program is not practically extendible to debt in general.

This is workable because distressed debt sells for pennies on the dollar. It’s debt that is considered uncollectable, so to sell it is somewhat of a gamble, but the buyers do make some phenomenal returns. By OWS buying the debt from the creditor, they get it for a super cheap price. This price generally allows collection agencies to make a profit on any money they manage to collect from the debtor. I would like to see this idea grow; it’s a phenomenal idea!

Great news! Good to see people using the system for good instead of ill. Never thought I’d see that happen.

But I do have a question. If you can buy debt, can individuals buy debt, even our own debt?

Just curious. It would seem to me to be a great Idea for us to buy our own debt, then forgive it. Maybe there are rules that make that difficult if not impossible, but maybe not. I don’t know enough about the subject. Maybe they never foresaw debtors buying their own debt. Any answers on that would be greatly appreciated.

that’s something great but there are billions worth of debt in medical bills, student loans, etc. if only there ware a few millions the problem would be easier to wipe-out completely. for DIY debt help, see “Debt Advice Diagrams” ( from Google search box)

I have a cousin who has made millions in this predatory market. I hope this effort really takes off and puts him out of business. And yes, these debts are ‘bought’ by speculators at extremely low prices (remember the poisoned assets they always pack into their complicated and obtuse “opportunities”?). They expect to harass and hound the debtors into signing on to a plan that makes the predator a ton but keeps the debtor in hock for years more, so $500 for $14,000 does make a little money for them. But not the fortunes they expect from their scams.

Please, for the love of all that is holy, buy my student loan debt. Four years of undergrad + three years of law school + no parental assistance = $180k in debt, and I can’t find a job. I think you have a fantastic idea, and I hope it takes off so that more people can be relieved of crippling debt accrued simply by trying to better themselves and help others.

Taxable unless (i) the borrower is bankrupt or insolvent or (ii) a special rule, 108(a)(1)(E), excluding discharges of “Qualified Principal Residence Indebtedness” enacted in 2007, applies.

That rule is explained further as follows:

108(h) Special Rules Relating to Qualified Principal Residence Indebtedness.- (1) Basis reduction.?The amount excluded from gross income by reason of subsection (a)(1)(E) shall be applied to reduce (but not below zero) the basis of the principal residence of the taxpayer. (2) Qualified principal residence indebtedness.-For purposes of this section, the term “qualified principal residence indebtedness” means acquisition indebtedness (within the meaning of section 163(h)(3)(B), applied by substituting “$2,000,000 ($1,000,000” for “$1,000,000 ($500,000” in clause (ii) thereof) with respect to the principal residence of the taxpayer. (3) Exception for certain discharges not related to taxpayer’s financial condition.-Subsection (a)(1)(E) shall not apply to the discharge of a loan if the discharge is on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. (4) Ordering rule.-If any loan is discharged, in whole or in part, and only a portion of such loan is qualified principal residence indebtedness, subsection (a)(1)(E) shall apply only to so much of the amount discharged as exceeds the amount of the loan (as determined immediately before such discharge) which is not qualified principal residence indebtedness. (5) Principal residence. For purposes of this subsection, the term “principal residence” has the same meaning as when used in section 121.

This sounds good in some ways. What about the people who have paid and paid, to keep from being drown by excessive debt, but can barely survive because of it. After 2 major emergencies and a bout of cancer, we are in the poor house. All medical bills are paid, but utilities are late, and the cabinets are bare. Transportation is falling apart, but credit is paid before becoming way behind. People like us need help, too! Wasn’t long ago we were middle class. Now we just struggle. By the way, we have always paid our taxes, too!!

this is actually what happens with debt as soon as its created, so everyone can relax. It just that OWS is doing something good. Here’s how the debt world works. As soon as debt is created, its packaged and sold at a certain rating. The initial lender does this to guarantee a return, and takes that money, making a few points every time, and lends out again. So, debt has been created, then its sold. That second buyer does the same thing. Gradually debt is separated into various risk categories and distributed across the debt marketplace. At some point, the highest risk debt ends up being bought be someone who thinks they can make money.

On the flip side, the rest of the debt earns money back for investors. If its graded right, it works out. If it doesn’t, the whole thing goes to shit. which is what happened.